Robert Freeman: Affordable Care Act — What Is It?

By now, you’ve probably heard about the Affordable Care Act, but you may still be wondering how it will affect you, your family or your small business.

Robert Freeman

The ACA (commonly called Obamacare) was enacted by Congress and signed into law by President Barack Obama in 2010. It represents one of the most significant overhauls of the U.S. health-care system since the passage of Medicare and Medicaid (Medi-Cal in California) in 1965. Key parts of the law will come into effect on Jan. 1.

The main purpose of the ACA is to provide as many people with affordable health insurance as possible; therefore, reducing the overall costs of health care. It provides a mixture of mechanisms — including mandates, subsidies and tax credits — to employers and individuals to promote the increase of the health insurance coverage rate.

The way in which any insurance product works (home, auto, life, etc.) is that those who purchase the coverage but don’t need to access it in effect pay the costs of those that do. So, the more people who participate in any insurance product, the more affordable the overall costs will be — because more people are sharing in the total program costs. Conversely, those who are uninsured add to everyone else’s costs as they are in effect accessing benefits without contributing their share of the costs.

The more people with health coverage will by definition reduce the number of uninsured Americans. These and other associated aspects of the ACA seek to both make health coverage more available to everyone as well as more affordable for everyone.

How will this impact you?

Families with children:

» Teens and young adults under the age of 26 may stay on your plan if it allows for dependent coverage.

» Coverage is provided for children’s pre-existing conditions.

» No more lifetime limits on care.

» Preventive care is covered.

Seniors:

» Under the health-care law, your existing guaranteed Medicare-covered benefits won’t be reduced or taken away. Neither will your ability to choose your own doctor.

Low-income individuals:

» Through the expansion of Medi-Cal, you may be eligible for coverage depending on your income. At CenCal Health, we expect to add 25,000 to 30,000 currently uninsured new members in Santa Barbara and San Luis Obispo counties.

Individuals who purchase their own insurance:

» Through newly created health insurance exchanges (called “Covered California”), individuals and small businesses, who before had little leverage in obtaining the most affordable coverage, can now combine their numbers to purchase coverage with the leverage that large employers enjoy. Further, health plans must compete through pricing to access these pooled members contained in the health exchanges. So costs are also managed in that manner.

Open enrollment for the Individual Health Exchange is scheduled to begin on Oct. 1.

Small businesses:

» In 2014, small businesses with generally fewer than 100 employees can shop in the Health Insurance Marketplace, which gives them similar buying power to what large businesses have to get better choices and lower prices. In this marketplace, individuals and small businesses can buy more affordable health benefit plans.

Open enrollment is scheduled to begin on Oct. 1.

» Small business tax credits may also be available for them.

Our population is aging, and as such health-care costs are projected to go up significantly. The ACA is an important attempt to mitigate these coming increased costs for society.

The concepts behind the ACA are sound (more people with health coverage makes the total costs more affordable; creating a greater volume of customers serves to drive down price). Will there be false starts, hiccups and bumps in the road? Of course there will. The ACA is a huge undertaking on a grand scale. It will take time to reorient the marketplace as well as buying/selling habits.

Rome wasn’t built in a day, and seeing results from the ACA will take time to become apparent. While we all value and take for granted Medicare coverage today, it was enormously controversial when it was enacted. We need to keep that in mind as we continue to evolve our nation’s health-care delivery system.

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